BAE System's £2.5billion Oman plane deal takes off

BAE Systems has won a £2.5bn
order for Typhoon fighter jets
and Hawk trainer planes with
the Sultanate of Oman.

The deal, which was expected
to be sealed by the end of the
year, will help safeguard up to
600 skilled engineering jobs in
the North of England at factories
in Lancashire and East Yorkshire,
both at BAE’s own plants
and at its suppliers.

The Omani deal will also be a
welcome fillip for the government’s
plans to rebalance the
economy towards manufacturing
and exports.

Prime Minister David Cameron,
who is due to visit Oman today,
said the contract is a ‘testament
to Britain’s leading aerospace
industry’.

It will also be some consolation
for the delays in renegotiating a
big Saudi contracted for
72 Typhoons.

Talks over the Salam programme
have so far failed to
reach an agreement over how
much the price – set in 2007 at
the height of the economic boom
and based on conditions in 2005
– should be reduced.

BAE admitted hold-ups with
the may hit earnings for this year
to the tune of 3pc.

Shares in BAE
lost 1.9p to 346.1p, but are up
26pc in the past 12 months.

Ian King, the chief executive, is
keen to expand the company’s
sales to the Middle East. The latest
contract involves 12 Typhoons
and eight Hawk Advanced Jet
Trainer aircraft, and will cover
supply of the planes and services.
It is the latest in a series of
contracts with Oman.

The Eurofigher Typhoon consortium
is a venture involving
BAE, Finmeccanica of Italy
and European aerospace
giant EADS.

King is engaged in developing a
stand-alone strategy for BAE
after its plans to merge with
EADS were scuppered by German
Chancellor Angela Merkel
and its own biggest investor, Neil
Woodford of Invesco.

The Middle East is central to
those hopes, as are other emerging
markets such as India
and Brazil.
Its two biggest markets, the
UK and the US, where the company
makes around 40pc of its
sales, are both under intense
pres sure to cut military
spending.

The situation is particularly
acute in the US. Further defence
cuts may be on the immediate
horizon due to the ‘fiscal cliff’ – a
cocktail of tax rises and reductions
in expenditure that will
take effect in the New Year unless
President Obama can secure an
eleventh hour deal with his political
opponents.

If not the US politicians cannot
agree, $500bn could be slashed
from national security and
defence expenditure – a big blow
to BAE.